SINGAPORE - A new classification framework for public housing is needed to ensure homes here remain affordable, with a good social mix in towns, and the system is fair for all, said Prime Minister Lee Hsien Loong on Sunday.

This is because the distinction between mature and non-mature estates, under the current classification framework, is blurring as non-mature estates are increasingly more developed.

In his National Day Rally speech, PM Lee said the Government will gradually provide more housing grants – especially grants that are means-tested – to keep costs down while providing the most support to lower- and middle-income households.

However, as the housing landscape here evolves, there is still the issue of how to value housing projects in “choicer” locations, which has posed a dilemma for the authorities, he said.

To resolve this, there will be a new Plus category for Build-To-Order (BTO) projects in locations deemed to be attractive, such as those close to MRT stations and town centres, PM Lee announced.

This new category will have more subsidies and stricter sale conditions, such as a 10-year minimum occupation period and an income ceiling on resale buyers. The idea is to enable the Housing Board (HDB) to moderate the prices of these flats and put them within reach of more people.

Blurring of lines between mature and non-mature estates

PM Lee noted that HDB has, since the 1990s, used the simple framework of mature and non-mature estates to guide public housing purchases here.

Mature estates are usually more centrally located, better connected and have more amenities, like Toa Payoh, and their popularity among homebuyers is reflected in the prices of the flats there.

Non-mature estates lose out in terms of location and convenience, but they make up for it in lower BTO prices.

The issue now is that the distinction between these two categories is blurring, with the non-mature estates of today becoming much more developed than in the past, PM Lee said.

“We imagine non-mature estates as being very bare-bones. Blocks of flats surrounded by empty, barren ground... But look around you now. Towns like Jurong East, Woodlands or Punggol... These towns have matured, and now have excellent connectivity and a full suite of amenities,” he added.

Noting that some BTO projects in non-mature estates are even more popular than those in mature estates, PM Lee said this shows that what matters to homebuyers are the specific attributes of a housing project, not whether the estate it is in has been called mature or non-mature.

In addition, he said there are fewer tracts of undeveloped land available to build new towns and estates.

Tengah, which was the first HDB town to be developed since Punggol more than two decades ago, will be the last new town here for some time – at least until Paya Lebar Air Base moves out to Changi and the site is cleared and redeveloped.

Singapore will increasingly need to build new HDB flats within or near existing estates, and these will often be more centrally located. PM Lee cited previously announced plans to build 5,000 new homes on the Old Police Academy site in the Mount Pleasant area as an example.

He added that many more BTO developments in the future will be in estates and locations that are effectively considered “mature”.

“That means the framework of mature and non-mature estates will no longer work,” he said.

Tackling affordability and the ‘lottery effect’

In announcing the new classification framework for HDB flats here, PM Lee said new BTO projects nestled in older, more developed areas will be more popular and naturally cost more.

This is also the case for projects in choicer locations within a region, such as those near an MRT station or town centre.

Such flats see the highest demand during BTO exercises because people know that it is a good deal, and the properties will fetch much higher resale prices later on, PM Lee added.

However, he warned that this turns the BTO exercise into a lottery as those who are lucky enough to ballot such flats stand to gain a windfall, which is not fair to the many more who miss out.

He added that the dilemma with projects like this is that if HDB prices them higher, it would shrink potential windfall gains, reduce the lottery effect and moderate demand – but also make these flats so expensive that they would be unaffordable for most families. The precinct runs the risk of becoming a higher-income enclave.

On the other hand, if HDB prices such projects lower to make them more affordable and get a better social mix, this would exacerbate the lottery effect and even more families would try for these flats.

“For every one happy successful buyer, there will be maybe 20, maybe more unsuccessful buyers, and they will be understandably and justifiably frustrated and very unhappy. And this is not fair,” PM Lee said.

He gave the example of Central Weave @ AMK — a BTO project in Ang Mo Kio that made the headlines when it was launched in August 2022, as prices for the five-room and three-generation flats in the project ranged from $713,000 to $877,000 before grants.

These are the most expensive BTO flats HDB has ever launched.

Explaining why the prices for the project were so high, even after the flats were heavily discounted off their true market value, PM Lee said the Central Weave @ AMK is highly desirable due to its location next to the MRT station and bus interchange, as well as its proximity to a hawker centre, wet market and AMK Hub.

These are attributes that HDB needed to reflect in its selling price, he added.

However, he noted that while some people had complained that the prices for the larger flats were exorbitant and unaffordable, these units were still heavily oversubscribed.

There are 372 five-room and three-generation flats in the project, and more than 6,500 households had applied for them, which translated to 17 applicants for each flat.

“Clearly, these applicants must have found the Central Weave project affordable and thought that the prices offered them good value; and no doubt many hoped their flats would fetch strong resale prices later on,” PM Lee added.

Good outcomes for PLH model

To illustrate how the new BTO classification will work, he said if Central Weave @ AMK were sold as a Plus project, HDB would have been able to lower the selling price of the units by providing more subsidies, but also maintain fairness by imposing tighter sales conditions.

He noted that a similar combination of increased subsidies and tighter restrictions is already being used for the Prime Location Public Housing (PLH) model announced in 2021, which has shown good outcomes so far.

For example, four-room flats in the Bukit Merah Ridge BTO project, which is being sold under the PLH scheme, launched in May 2022 with prices ranging between $540,000 to $737,000.

PM Lee said each of these flats attracted 5.4 applicants, far fewer than Central Weave @ AMK, even when compared with the four-room flats in the Ang Mo Kio project.

“We hope Plus projects will achieve similarly good outcomes,” he added.

“As we build more projects in mature areas, this Plus model will help us to meet our three objectives: affordability, good social mix, and fairness.”

PM Lee noted that HDB is a vital part of the Singapore story, and the Singaporean identity is deeply intertwined with HDB flats and towns.

He said the People’s Action Party government put a heavy emphasis on public housing right from the start, and the Republic has one of the highest homeownership rates in the world today.

“Housing has always meant much more to us than a roof over our heads. It also gives every Singaporean a valuable asset and a powerful reason to fight for our country and our future,” PM Lee added.

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Watch PM Lee’s National Day Rally speech here: